Democrats Seek Full Relief for Defrauded Borrowers

November 15, 2017

Congressional Democrats called on Education Secretary Betsy DeVos Tuesday to grant full student loan relief to borrowers who were defrauded or misled by their colleges.

In a letter signed by 26 Senate and House lawmakers, the Democrats said they were concerned over reports that the Department of Education is considering granting partial relief to defrauded student loan borrowers. Officials at the department have had discussions about whether and how to grant partial relief to some borrowers based on the amount of harm they suffered.

DeVos in June suspended an Obama administration student loan protection regulation, known as borrower defense, that provided a new federal framework for processing loan relief claims. While the department has pursued a negotiated rule-making process to arrive at a new rule, it's said it will process thousands of pending borrower-defense claims under a 1995 regulation that used violation of state law as a basis for approving a claim.

The Democrats said using earnings data from the Social Security Administration to calculate harm could not be done unilaterally by the department. They asked DeVos, among other questions, to confirm whether such conversations are taking place and whether the department has been instructed by the White House or Department of Treasury to limit the budgetary impact of loan relief claims.

About 95,000 borrower defense claims are currently pending resolution, acting Under Secretary James Manning told panelists negotiating a new borrower-defense regulation Tuesday. About 65 percent of those claims were filed by former students of for-profit Corinthian Colleges institutions.

Many borrowers have waited for resolution on those claims for two years or more. Manning said in his comments to negotiators that the department will forgive interest that accrues on loans when a borrower-defense application takes more than a year to resolve. He also said that as it has worked to process claims, the department has found that some loans "fully or partially" fell outside the applicable statute of limitations in their state, making them ineligible for discharge.

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